Tata Sons to scrap all deals with Cyrus Mistry's group
Under chairman N Chandrasekaran's directions, the board of Tata Sons has ordered its group companies to scrap all business dealings with Cyrus and Shapoor Mistry's Shapoorji Pallonji Group. The move, which marks the latest development in the battle between the two groups, has put transactions worth hundreds of crores of rupees at risk.
Details of the directive
The directive detailed that certain SP Group companies had presented to the National Company Law Tribunal (NCLT) "incorrect and distorted versions of facts" pertaining to the business practices and affairs of Tata Sons and Tata companies. By doing so, SP Group had damaged the reputation of the Tata brand and the goodwill associated with it.
All business ties, direct and indirect, to be cut
"As the promoter and principal shareholder of your company and as the custodian of the 'Tata' brand, Tata Sons does not support any businesses dealing in any form, whether directly or indirectly, through contracts or subcontracting arrangements," said the directive signed by Tata Sons' COO.
Tata Group companies received the directive on 14th August
Emails were sent to all Tata Group companies asking them to start proceedings to terminate all business deals with the SP Group companies. The Tata Group companies - ranging from behemoths like Tata Steel, Tata Chemicals, Tata Motors, Tata Chemicals etc. to smaller ones like Voltas, Trent etc. - received the directive on 14th August.
Vibrant Tata-SP Group relations in pre-conflict times
According to estimates, the Shapoorji Pallonji Group has received over Rs. 20,000 crore worth of business from the Tatas since the 1980s. The SP Group had also built most of the TCS campuses and Tata Motors factories.
How the move is going to affect the SP Group
The decision taken by Tata Sons will affect almost 50 SP Group companies including key companies like Eureka Forbes, Forbes & Company Ltd., and Afcons Infrastructure. Although the SP Group owns 18.4% stake in Tata Sons, its sole connection with Tata Sons will be as a shareholder without any board representation. It is unclear whether the SP Group will challenge the decision in court.
Official Statement from the SP group
"Mr. Mistry had, when he was chairman of Tata Sons, to ensure that no new contracts were awarded to the SP group, during his tenure. Orders from the Tata Group fell from Rs. 1125crore in 2012-13 to zero in 2015-16...Any residual orders is extremely insignificant in value for the SP Group."
